The euro US dollar exchange rate traded within a tight range on Thursday in a relatively quiet session. The pair closed flat at US$1.1109. The pair is struggling for direction in early trade on Friday.
The euro trended broadly higher versus peers on Thursday after data showed that industrial production in Europe’s largest economy jumped by the most in one and a half years. Industrial output increased by 1.1% month on month, ahead of the 0.7% increase that analysts had pencilled in. October’s decline of -1.7% was also revised higher to -1%. The stronger than forecast data helped lift the euro.
Whilst industrial output data was encouraging, other data from the German manufacturing sector this week has been more concerning. The mixed results across the week suggest that it is premature to call the bottom of the slump in the sector.
Today the eurozone economic calendar is light. Investors will turn towards the US non-farm payroll (NFP) report. Given that the euro moves inversely to the US dollar, a strong NFP report could boost the dollar and pull the euro southwards.
164,000 Jobs Expected
The US dollar advanced on Thursday for the third consecutive session as concerns over escalating troubles in the Mideast eased. US economic data was once again supportive of the dollar. Initial jobless claims rose at a weekly 214k beating analysts’ expectations, whilst adding to mounting evidence that the US economy is holding up well.
Today investors will be looking towards a US Department of Labour’s employment report, the non-farm payroll. Analysts are expecting the number of jobs created in December to have eased back from November’s impressive 226,000 jobs, at 164,000. The unemployment rate is expected to remain unchanged at 3.5%. Hourly earnings are expected to gain 0.3% following November’s 0.2% lift. Annually earnings will remain stable at 3.1%.
The NFP is the most keenly awaited monthly macro economic release because it is considered the most complete analysis of the American labour market. The ADP private payroll report is closely correlated to the NFP, although occasionally the two numbers diverge sharply. The ADP report for December was unexpectedly strong raising the probability of a strong December NFP.
|What do these figures mean?|
|When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written:
1 EUR = 1.12829 USD
Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro.
Or, if you were looking at it the other way around:
1 USD = 0.88789 EUR
In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar.